Increasing Power Of Retailers Amid Inflation

The conventional wisdom is that Pakistani polity suffers from the excessive greed of the elites that pay no heed to the interest and welfare of the common people and they are always left alone to deal with rising prices of consumer products whenever there is inflationary pressure.

In this context it was routinely mentioned that the cardinal factors of national existence in Pakistan stood on the foundation of two historical legacies: the concentration of power in an overdeveloped state and its elite, including the dynastic political elite. Although elites balance multiple class interests, they essentially remain responsive to their own interests and the interests of their narrow client base. It was often lamented that in the broader scheme of things the governance order in Pakistan has not been open to the wider citizenry.

The latest developments in the country, however, point out that the narrowness of the interests of the elites are now shared by emerging forces and the most prominent of them is the vendor. The rising power of the vendor is duly augmented by the hoarder and the transporter and they jointly support the vendor as their front-man.

This situation became manifest in the recent crisis emanating from unparalleled inflation bringing in tremendous increase in prices of all goods and services.

It must be kept in mind that most significant developments altering course of history have humble beginnings such as increase of sugar prices that finally ended the Ayub Khan rule in Pakistan. In this context the unbridled inflationary cycle has signified a general unrest gripping the country for which the factors now guiding the national destiny are held responsible. This difficulty has taken a different turn in which the cost of opening doors to a third political force in the country is now debated as untenable in the quarters that brought it about.

In this backdrop it must be brought to fore that the agricultural produce has broken all records with bumper crops all over but despite such windfall the price spiral has shown no signs of slowing down. It is therefore important to analyse the perennial fluctuation in prices in Pakistan and pin down the causes instead of passing on the buck to the political malaise. This analysis is urgently required as the overall production of edibles remains in surplus and a fair bit of them is routinely exported.

It is worthwhile to mention that the bumper crops are solely a natural bounty as the agriculture sector has done nothing to increase the output. Similarly, not much effort has been undertaken to increase the per-hectare yield, which has remained static since the last many decades. In the meanwhile, the domestic demand for has increased and even a small shortfall in production is bound to cause a crisis. Here is where the role of the vendor phenomenon comes in.

The vendor looks forward to the mishandling of crop at the farm and remains current about the poor storage and transportation facilities and inadequate market infrastructure. He is often aware that which crop will be picked up by transporters on priority and which is going to be hoarded. He is constantly apprised of the profiteering levels of importers/traders/wholesalers and transporters. These components of the market depend upon the vendor to be an effective public face of the retail chain and he is encouraged to keep up his activities by providing him merchandise on long-term credit basis. He is given wide discretionary authority to keep on fluctuating the prices and also to provide concessions wherever appropriate.

The entire sequential process is built around the vendor and he acts as the king-pin. The hidden market forces jump-up to his assistance whenever public sentiment advocates boycott of pricey items such as tomatoes and portray the vendor as the helpless daily wage earner who makes his ends meet by labouring in difficult conditions. The vendor is the largest segment of retail trade that operates not only out of the regular supply-chain and successfully avoiding all supervisory regulations.

The only way to tackle the growing power of the vendor is to establish large purchase centres and wholesale markets at district level, preferably under public-private partnerships. Similarly efforts should be made for onward supplies to other districts of the same province or of another province that can be cheaply done by establishing a network of licensed transporters so that at the time of supply shocks they cannot overcharge.

The most effective organ for limiting the power of the vendor are the provincial governments that, with active collaboration of the corporate sector, can also set up large processing units for under public-private partnerships. At times of peak production of a certain items, these units can get supplies at agreed prices so that growers do not have to sell their produce for a song. Also, during a lean production period in a certain district or province, processed items can be supplied to retail markets there so that the prices remain stable.